10 Best Wide Moat Stocks to Invest In

2) Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 279

Microsoft Corporation (NASDAQ:MSFT) continues to enjoy a wide economic moat, courtesy of 2 segments, i.e., productivity and business processes and intelligent cloud. The company’s customers tend to favour its products as stand-alone solutions and appreciate its immense product breadth. Furthermore, Microsoft Corporation (NASDAQ:MSFT)’s applications remain tightly integrated, making the products more appealing. Now, given the inclusion of OpenAI’s machine learning technology, the company has further strengthened its economic moat.

Morningstar opines that Microsoft Corporation (NASDAQ:MSFT) continues to maintain healthy AI demand and monetization. Overall, the expansion of hybrid cloud environments, proliferation of AI, and Azure are expected to fuel growth in 2025. Microsoft Corporation (NASDAQ:MSFT) has been using its on-premises dominance to enable clients to move to the cloud. Anyone using the company’s wildly popular suite of apps – including Word, PowerPoint, and Excel – will stick to its ecosystem, aiding long-term revenue visibility.

Therefore, increased customer engagement supports it in generating revenue from the initial sale of services, enabling the company to upsell and cross-sell other ones too. RiverPark Advisors, an investment advisory firm and sponsor of the RiverPark family of mutual funds, released its Q3 2024 investor letter. Here is what the fund said:

“Microsoft Corporation (NASDAQ:MSFT): MSFT was a top detractor in the third quarter following a fiscal fourth quarter earnings report that featured inline operating metrics but mixed guidance. Positively, the company reported strong revenue (+15%) and earnings growth (+10%), powered by Azure (+30%), and operating margins of 43%. Guidance however calls for lower than expected fiscal first quarter Azure revenue as infrastructure constraints limit growth, and higher capital expenditures throughout the company’s fiscal 2025 to alleviate these constraints. The company expects growth to reaccelerate in the back half of fiscal 2025 as more AI capacity comes online.

Cloud-based services have become the company’s largest revenue and earnings producer. The company’s Azure platform alone has the potential to grow to more than $200 billion in annual revenue over the next decade. Overall, we believe that the company will continue to deliver double-digit revenue and EPS growth and generate an enormous amount of free cash flow to return to shareholders and use for acquisitions.”